Vodafone network access to rival to secure Liberty deal in Germany

UK-based Vodafone, the world’s No 2 mobile operator, is seeking to increase its fixed-line business to better compete with German market leader Deutsche Telekom.

Vodafone on Tuesday also said that Telefonica Deutschland would be able to offer super-fast services over Vodafone and Liberty’s Unitymedia cable networks in Germany if the deal is approved.

The networks will cover 23.7 million households and would help Telefonica Deutschland to move up from its distant third position in fixed-line broadband, behind Deutsche and Vodafone.

Telefonica Deutschland Chief Executive Markus Haas said the agreement would enable it to connect millions of additional households in Germany with high-speed internet.

“By adding fast cable connections, we now have access to an extensive infrastructure portfolio and can offer to even more O2 customers attractive broadband products – including internet-based TV with O2 TV – for better value for money,” he said.

Telefonica Deutschland controlled nearly a quarter of the German mobile market, after Deutsche and ahead of Vodafone, according to a 2018 estimate by VATM, which represents independent telecom firms. But it trailed rivals in the fixed-line broadband market, with just 5.9 per cent.

US based Liberty Global has already sold its Austrian business and is now seeking to exit Switzerland as well as Germany and central Europe in what would be its biggest ever divestment.

It had 13 million subscriptions and made revenue of $700 million in Germany in the first quarter of this year.

CEO Mike Fries said on Monday that he was confident the deal could be completed this summer. “We have crossed a number of key milestones and the European Commission is currently in the final stages of its review,” he said.

Tuesday’s announcement was designed to win over regulators in Brussels who are reviewing the proposed merger with Liberty, before a decision by July 9.

Liberty Global was last year given the green light by Brussels to buy Dutch cable operator Ziggo when it agreed to several conditions over access to its network.

Vodafone and Unitymedia, Liberty’s German business, operate in different parts of the country and do not compete directly. But a merged entity would have a very strong position in cable and broadband, in particular to multi-family apartment blocks, leading competitors to urge regulators to step in and ensure that they also have ‘last-mile’ access to households.

Deutsche Telekom CEO Tim Hoettges had, last year, said the Vodafone-Unity merger was unacceptable because it would create a cable TV monopoly in Germany.

Deutsche Telekom said on Tuesday the Vodafone offer to open its network showed the British company was desperate to keep its deal alive. 

The European Commission opened a full-scale probe into the deal in December. Sources, however, said last month it had not raised any major concerns about the impact of the deal on Germany’s cable market.

EU has set a 9 July deadline for decision on Vodafone purchase of Liberty assets.